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Drug patents costing Australia billions of dollars

TONY EASTLEY: A government commissioned review of drug patents has found that Australia's Free trade Agreement with the US has deprived the economy of billions of dollars in export revenue and made medicine more expensive.

A draft report of the independent review has found Australia signed the agreement without properly considering its own economic interests.

The report concludes that patent restrictions add hundreds of millions of dollars to the bill for Australia's Pharmaceutical Benefits Scheme by delaying the introduction of cheaper alternatives.

Simon Lauder reports.

SIMON LAUDER: Patent law is a dry and complicated topic but it's having a dramatic impact on the cost of medicine and the national economy.

The Federal Government commissioned a panel to review pharmaceutical patents and its draft report has found Australia signed the US Free Trade Agreement without looking after its own interests.

Dr Nicholas Gruen is on the review panel.

NICHOLAS GRUEN: We have incurred more costs than benefits in agreeing to extend pharmaceutical patents. Similar requests have been made of countries like Canada and New Zealand and they've said no.

They've said that they don't believe that simply unilaterally extending patents was in their interest. And as we look at the evidence, it looks to us that it has not been in our interest to agree to extend those patents.

SIMON LAUDER: Dr Gruen says allowing pharmaceutical companies to extend patents is costing the pharmaceutical benefits scheme about $200 million a year because it stops Australia from using cheaper generic drugs.

NICHOLAS GRUEN: We can't bring the price of those products down with competition from other products and therefore we can't allow the fairly mechanical processes of the Pharmaceutical Benefits Scheme to take effect.

When a patent expires there are certain minimum price reductions that are written into the Pharmaceutical Benefits Scheme, that those price reductions are often exceeded. So we don't get that until the patent ends, which is many- which is generally speaking several years later.

SIMON LAUDER: The panel has also raised concerns about agreements which give exclusive rights to drug companies, preventing Australia from manufacturing generic drugs for export.

NICHOLAS GRUEN: Australian manufacturers may be very capable of supplying a market that has gone generic - that is, a market where the patent has expired. But here back in Australia, because someone still owns the patent they don't just have a right to market exclusively in Australia, they have the exclusive right to manufacture in Australia, which means that we can't even supply a foreign market with generic drugs.

And the evidence suggests that that has amounted to costing- that that has stopped us exporting billions of dollars worth of pharmaceuticals. So it's not a small or trivial matter. It's an important matter.

SIMON LAUDER: Far from learning from these mistakes, the panel says, Australia is repeating them in negotiations for a new Trans Pacific Partnership. Talks on that agreement have been happening behind closed doors for years.

NICHOLAS GRUEN: Throughout this whole process we haven't seen any evidence of Australian governments or Australian officials going into international negotiations saying 'This isn't working out, we should be trying to fix some of these problems'.

Likewise we're unaware of any representations being made by Australia - or I think other countries within the TPP - saying that we should have an aspiration to try and clean some of these just bad policy design issues up. We have lacked a kind of strategic intent here and we've had very low aspirations.

SIMON LAUDER: The panel is due to hand its final report to the Government next month.

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